In the spring of 2018 the Trump administration announced a new round of tariffs against the Peoples Republic of China ("PRC") ("301 Tariffs"). These 301 Tariffs were enacted this summer and encompass a massive, if not total cross section, of products and components manufactured in the PRC and imported into the United States. The 301 Tariffs represent an increase in "Group 1" and "Group 2" of 25% and a tariff increase for "Group 3" of 10%.1
To afford U.S. companies a chance to seek an exception from these large tariff increases, the administration created the "301 Hearing" process, which have been and will be, held in Washington, D.C. The 301 Hearings and initial determinations constitute an extremely fast-tracked process, commenced in July, with the above-referenced first two "301 Hearing Groups" testimony completed, and initial rulings issued by "The Committee", in early August. I was fortunate enough to represent a Braumiller Law Group, PLLC client and testify on their behalf during the Group 2 301 Hearings, during the week of July 23rd, 2018. The Group 3 (currently final 301 Hearing Group) is set for the week of August 20th, 2018, with non-testifying written statements open for submission until September 5th, 2018.
Although, at the time of writing this article, no further 301 Tariffs have been announced and therefore no additional hearings scheduled. Based upon the administrations rhetoric, additional rounds of tariffs (against the PRC and/or other countries), may very well be on the horizon. The enactment of new tariffs would in all likelihood, bring with it the same fast-track 301 Hearing and decision- making model which was implemented this summer, and as such, a brief review of this hearing and testimony process may prove to be very helpful should your company's products or components become the target of new tariffs in the coming months.
The Committee before which I testified in Group 2 consisted of one representative from each of the following; The Department of State ("State"), The Department of Commerce ("Commerce"), The Department of Homeland Security ("DHS"), The Department of Labor ("Labor") and two representatives from the International Trade Commission ("ITC"). Throughout the day in which I testified, I attended the hearings as The Committee heard five minutes of testimony from each company representative, which was undertaken in groups of six-to-eight company representatives at a time ("Testifying Group"). Upon conclusion of the testimony from all members in the Testifying Group, The Committee then undertook follow-up questions directed at some, if not all, of the members of the Testifying Group until satisfied.
Nature of Inquiries/Follow-Up Questions by The Committee:
Throughout the day's testimony a theme arose in the follow-up questions The Committee posed to various testifying individuals. The theme focused on the following issues; i.) Were there currently any existing financially valid options for the testifying company's product/component to be manufactured in a country other than China – and if yes – why haven't all such options not already being fully explored if not undertaken; ii.) IF no financially valid options for the manufacturing of the testifying company's product/component currently existed, what were the reasons for the absence of any such options presently; iii.) IF no financially valid options for the manufacturing of the testifying company's product/component existed currently, how long would it take, and what were the estimated costs for the testifying company to research, locate, and undertake all necessary steps and efforts to fully establish an economically viable manufacturing venue outside of China.
Determine The Tariff Code Removal Value If Your Company has Multiple Products/Components:
The Committee clearly understands that the immediate imposition of the 301 Tariffs at such a high percentage, will obviously have a dilatory effect upon U.S. companies (and therefore upon their U.S. consumers and employees). In my opinion, what The Committee seeks in these 301 Tariff Hearings (and may very well seek in any future tariff removal hearings), are unique and specific examples when the effect of the tariff would result in economic damages beyond the understandable and foreseeable, and could put at risk the company's underlying production of equipment (if not the economic viability of the company itself), as a result of a current inability to obtain the product or component from any other nation presently.
Should your company import multiple products or components under a proposed tariff code being reviewed by The Committee, in my opinion the "Value of Tariff Code Removal" should not be viewed from the perspective of the most tariffs paid as a result of the greatest volume of products/components imported, but rather, the Value of Tariff Code Removal should be focused on the unique and specific instances where the implantation of the tariff would result in the most severe and gravest of economic damages to the company, in which no viable alternative currently exists.
To Testify or Not Testify:
There are obvious legal fees and costs required in the drafting and submission of the testimony to be read before The Committee, as well as testifying during the hearing. However, the in-person opportunity to make a concise cogent explanation of why your company sought removal from a potentially massive tariff is an opportunity which should not be dismissed lightly. Although it is possible for the written testimony to be drafted by non-attorneys, as well as to be presented by the company President, or other non-attorney representative, only one representative of each company may appear to testify. The opportunity of The Committee to propound follow-up questions to each testifying representative places the individual testifying in the realm more suited to that of counsel well accustomed to such an environment as what is stated in on the public record without exception.
In light of the administration's rhetoric regarding the imposition of tariffs, this fast-tracked process of written statement and testimony before The Committee is a model which, having been created and instituted, will be revisited multiple times in the coming months. Familiarity with this process and knowing what information and scenarios The Committee is seeking in order to grant the sought after tariff code removal may be of an invaluable resource should your company's product or components become the target of such substantial tariffs in the future.
1.. It was announced the first week in August that the tariffs on the products and components made the subject of Hearing Group No. 3 may also be increased to 25% as well.